Mecardo Analysis - Export success making life difficult for local consumers

By: "Farm Tender" News
Ag Tech News
Jun 27, 2019
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By Matt Dalgleish | Source: Sources DAWR, ABS, Mecardo.

The growth in Australia’s export markets for lamb and mutton are a credit to our local producers and the efforts of Meat and Livestock Australia (MLA) in promoting the industry’s produce across diverse offshore markets. However, the tighter supply of recent years combined with increased overseas demand has fueled price gains for both lamb and mutton at the sale yard and this has filtered through to the retail consumer making the traditional lamb roast less common at the dinner table.

Since 2012, annual lamb exports have exceeded domestic Australian lamb consumption and the annual export volumes of Australian lamb shows significant growth over the last two decades, compared to a relatively static level of domestic lamb consumption.

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Indeed, a comparison between volumes in 2000 to 2018 shows that lamb exports from Australia have grown by 139% while the domestic consumption levels have declined by 19% - Figure 1. The growth in lamb export markets is such that Australia’s lamb export ratio (exports as a percentage of production in cwt terms) has increased from 37% of lamb product exported in 2000 to 63% in 2018.

The situation for mutton exports is even more stark considering that in 2018 we saw 96% of mutton production exported offshore. Back in 2000 the export ratio for mutton was at 62%, however, domestic consumption of mutton declined by 85% from 2000 to 2010.

Since 2010 annual consumption of mutton in Australia has averaged a mere 12,000 tonnes cwt and the contrast between declining local demand for both lamb and mutton is highlighted in the combined lamb and mutton volumes outlined on Figure 2. In 2018 the combined export ratio of lamb and mutton reached 73% of total Australian sheep meat production signaling the solid growth in the export sector given the export ratio was at 49% in 2000.

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While the export success is a fantastic result for Australian producers and has supported increased sale yard prices it has also made lamb less affordable at the retail level, as outlined in Mecardo’s retail lamb price analysis released earlier this week.

2019-06-27 Sheep 1

Key points

* Lamb exports from Australia have grown 139% over the last two decades while domestic consumption has fallen 19%

* Combined lamb and mutton exports now represent 73% of total Australian production of sheep meat

* Rising retail prices have pressured domestic lamb and mutton annual per capita consumption levels to historic lows in the last two decades

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What does this mean?

Higher prices at the retail level have put pressure on Australian per capita consumption level of lamb and mutton over the last two decades. Annual lamb consumption has fallen from 12.2 kg/per person in 2000 to 7.5kg in 2018, while annual mutton consumption has fallen from 6.8kg to 0.35kg/per person over the same time horizon – Figure 3.

2019-06-27 Sheep 3

The growth outlook in offshore demand for Australian lamb and mutton remains robust and while the flock remains in liquidation phase it is going to be some time before we can expand production, so prices are likely to remain firm and could extend higher in the coming seasons pushing the traditional lamb roast further into luxury meal territory for local consumers.

www.mecardo.com.au